A federal grand jury indicted Nevin Shapiro, former owner and chief executive officer of Capitol Investments USA Inc. (Capitol), today for allegedly overseeing a $880 million Ponzi scheme linked to his purported wholesale grocery distribution business, U.S. Attorney Paul J. Fishman announced.
The indictment charges Shapiro, 41, of Miami Beach, Fla., with using Capitol to solicit hundreds of millions of dollars from individuals who believed they were investing in Shapiro’s grocery distribution business. The indictment alleges that Capitol had no active wholesale grocery business during the relevant time period, and that Shapiro used new investor funds to make principal and interest payments to existing investors, as well as to fund his own lavish lifestyle.
Shapiro was previously charged by complaint and surrendered to special agents of the FBI and the Internal Revenue Service (IRS) on April 21, 2010, in Newark. He has been in federal custody since that time. The complaint charged Shapiro with one count each of securities fraud and money laundering; the indictment adds one count of conspiracy to commit securities and wire fraud, two counts of wire fraud, and one count of money laundering. The indictment also seeks forfeiture of any money or property identified as proceeds from the offenses.
According to the indictment and other documents filed in this case in federal court in Newark, from January 2005 through November 2009, Shapiro allegedly solicited investors from New Jersey and throughout the United States through Capitol, telling them that he would use their money to fund his wholesale grocery distribution business. Allegedly, to induce those investors, Shapiro directed others to create and show to the investors documents fraudulently touting Capitol’s profitability. Those supposed documents included: financial statements profit and loss figures that fraudulently represented that Capitol’s wholesale grocery business was generating tens of millions of dollars in annual sales; personal and business tax returns for Shapiro and Capitol that also fraudulently reflected those sales; and numerous invoices fraudulently reflecting transactions between Capitol and other companies in the wholesale grocery business.
As a result of these alleged solicitations, more than 60 victim investors, including some from New Jersey, sent more than $880 million to Shapiro and Capitol during this time period. Beginning in January 2009, Shapiro and Capitol failed to make required principal and interest payments to investors. At the time, Shapiro purportedly told investors, among other things, that the payments were not being made because Capitol’s vendors were late in making payments, that Capitol was suffering from cash flow problems and that Shapiro’s accountant was on vacation.
Shapiro and Capitol were forced into bankruptcy in November 2009. At that time, they supposedly owed more than $100 million to victim investors.
If convicted, Shapiro faces the maximum potential penalty for each count in the indictment, which includes conspiracy to commit securities fraud and wire fraud (five years in prison; fine of $250,000 or twice the gross gain or loss from the offense); securities fraud (20 years in prison; fine of $5 million); wire fraud (20 years in prison; fine of $250,000 or twice the gross gain or loss from the offense) and money laundering (10 years in prison; fine of $250,000 or twice the gross gain or loss from the offense).
The charges and allegations made in the indictment are merely accusations, and the defendant is considered innocent unless and until proven guilty.
Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, Interpol Litigation, International Extradition and OFAC Litigation.
The author of this blog is Douglas McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.
